Analytics & TestingEcommerce and Retail

How Successful Loyalty Programs Drive Insights and Behavioral Economics

Note: This article was written by Douglas Karr from a Q&A interview with Suzi via email.

Loyalty programs provide brands with an opportunity to retain their existing customers and turn them into raving fans. By definition, loyalty members are familiar with your brand, are spending money with you, and are providing you with valuable data in the process.

For organizations, loyalty programs are an ideal means to uncover meaningful insights about customers, learn about what makes them tick, and ultimately build stronger, more informed relationships that have many long-term benefits. With a strong value proposition, loyalty programs can also support customer acquisition efforts.

For customers, the promotions and free benefits do definitely matter, but it’s much more than that. Consumers like feeling valued and want to build relationships – it’s what we’re wired to do. Loyalty programs provide customers with a sense of belonging, feeling of being appreciated, and also give that dopamine hit when they see those perks rolling in or our loyalty status rising. In short, loyalty programs are mutually beneficial to the organization and the consumer.

Loyalty Programs Aren’t Just About Sales

At Brooks Bell, we solve complex business problems through experimentation and insights. Most organizations define a successful loyalty program as one that hits their goals when it comes to getting a certain number of new loyalty members or moving a certain number of members from one tier to the next.

However, the mark of a truly successful program is that organizations see their loyalty program as a channel for customer insights. Instead of focusing on the numbers, these organizations focus on identifying the why behind customer engagement with the brand.

The organizations then use that information to more deeply understand customers and deliver incredible value based on the things that matter to their customers. Those learnings don’t stay within the loyalty program – they are shared throughout the organization and have the power to influence the many touchpoints each customer has with their brand.

Loyalty Program Pitfalls to Avoid

Loyalty programs are often viewed as a cost center within an organization, resulting in them often being on the sidelines – without a budget, resources, or tools. Loyalty programs have so much potential to generate meaningful insights but, due to their positioning in the organization, this may be overlooked or underestimated. We encourage brands to ensure that loyalty is working directly with all parts of the customer experience like e-commerce, customer care, marketing, etc. They have important information to share and must be positioned appropriately so that the organization can benefit from what they know, and vice versa.

What Is Behavioral Economics?

Behavioral economics is the study of human decision-making. This research is fascinating because consumers don’t always make the decisions that businesses expect. There are many studies that define various behavioral principles that we can learn from to help ensure we’re delivering positive experiences to prospects and customers. This is especially important in our business, as we are focused on uncovering customer insights that build stronger relationships between our clients and their customers.

For an in-depth understanding of Behavioral Economics, a recommended read is Predictably Irrational: The Hidden Forces That Shape Our Decisions by Dan Ariely.

When it comes to loyalty programs, there are many deep-rooted behavioral principles at play – loss aversion, social proof, gamification, goal visualization effect, the endowed progress effect, and more. For brands considering how to communicate their loyalty program, it’s critical to recognize that humans want to fit in, to feel part of something and we hate to miss out on things.

Loyalty programs hit all of those marks naturally, so communicating them clearly should resonate immediately. When it comes to making loyalty enjoyable so that your members want to engage, brands should know that making progress easily visible, displaying achievements, and making it fun are very powerful.

Is your digital experience built for real shopper behavior? Download our whitepaper we partnered with FullStory on to outline four key behavioral economics principles that you can use to build an emotionally resonant, intuitive, and high converting digital experience:

Download Behavioral Economics In Action

Disclosure: Martech Zone is including its Amazon affiliate link to Dan’s Book here.

Suzi Tripp

Suzi Tripp joined Brooks Bell in 2011, overseeing and growing experimentation programs for their expanding roster of enterprise companies. In her current role as VP of Insights, Suzi is able to continue her passion of generating impactful test strategies and uncovering meaningful customer insights to solve complex business problems.

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